While the pandemic slammed sales for those businesses serving restaurants and institutions, the upheaval provided an unexpected bonanza for packaged goods operators in the retail channel.
According to Baking & Snack’s annual Capital Spending Survey, 92% of bakery executives reported that their outlook was somewhat or very positive for the wholesale baking industry while an even higher 97% had a positive outlook for their own companies.
“The positivity is off the charts now,” said Marjorie Hellmer, president, Cypress Research, the Kansas City, Mo.-based firm that conducted the study, which is sponsored by BEMA.
“However, as is characteristic of the baking industry, executives are more comfortable reporting outlooks for their specific companies than speaking for the industry,” she continued. “This is why we see slightly more company-level positivity.”
Moreover, she pointed out that 61% of executives see the outlook for the baking industry getting better in 2021 compared to 2020 while 36% expect no change from 2020. Only 27% of bakers expected an improved year at the beginning of 2020 while 66% expected 2020 to look a lot like 2019. No one could foresee the public health crisis that was on the horizon.
“We have to reach back three years to see the sort of optimism that baking executives anticipate for 2021,” Ms. Hellmer said. “It has been since 2018 that we have seen this kind of bullishness in the industry.”
Retail has bolstered optimism as more stay-at-home households rediscovered the bread aisle and other packaged baked goods. In fact, a whopping 92% of respondents had a very or somewhat positive 2021 outlook for the retail channel, followed by contract manufacturing for food distributors (84%) and industrial/commercial customers (83%).
Only 56% of bakers, however, have a positive outlook for restaurants and foodservice.
“Foodservice is taking the most significant channel hit as executives look to 2021,” Ms. Hellmer said. “We know there will be continued stress here.”
Bakeries like International Delights, the Clifton, NJ-based producer of fresh and frozen pastries and sweet goods, report that foodservice has yet to recover in the mid-Atlantic region.
“Even if we somehow get over the virus in the next few months, it’ll take a while for tourists, office workers, airline passengers, college students and others to return to previous levels of away-from-home consumption,” noted Nicolas Sayegh, co-managing director for International Delights.
He added that small businesses such as independent coffee shops, quick-service restaurants, delis and hotels are struggling to remain open or are closing altogether.
“As a result, we’ve been adjusting by targeting more of the retail segment, developing products specifically for the grocery market,” Mr. Sayegh said. “With more people working from home and students studying online, grocery store sales have grown at the expense of restaurants and other foodservice.”
Larry Marcucci, chief executive officer, Alpha Baking Co., Chicago, anticipates that 2021 will start to improve, but recovery for baking companies with exposure to foodservice may take more time.
“I am afraid that it might take longer than I wish, but a lot depends on how fast they roll out the vaccine, which will give confidence to people to get back to normal,” he said. “I think people want to get back to ‘normal,’ and there will be a lot of pent-up demand to ‘get out and do stuff.’ ”
Baking & Snack’s Capital Spending Survey provides the leading benchmarking study about the industry’s current and future investments in baking equipment and facilities. Cypress Research has analyzed insights from 174 baking professionals involved in equipment-related purchases for their companies.
Baking & Snack has partnered with BEMA, which sponsored the industry study and provided an additional layer of equipment-based expertise for this annual industry-benchmarking survey.
Kerwin Brown, BEMA’s president and chief executive officer, called it a “natural fit.”
“It is a tool that has long been used by our association’s members to help gauge the future of the equipment business, and it’s one of the best industry tools we have for looking at the future of capital spending,” Mr. Brown said.
During the past year, the association launched its BEMA Intel platform aimed at compiling comprehensive data that help bakery manufacturers and suppliers understand the health of the US baking industry on a regular basis. Mr. Brown said the capital spending study dovetails nicely into this broader initiative.
For more information on the capital spending survey and BEMA Intel, visit www.BEMA.org
This article is an excerpt from the February 2021 issue of Baking & Snack. To read the entire feature on capital spending survey, click here.